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Chapter 47 Securities Regulation

Chapter 47 Securities Regulation. Twomey, Business Law and the Regulatory Environment (14th Ed.). Securities Regulation [47-1]. I. Blue Sky Laws (State) Protect public from intrastate sale of worthless securities

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Chapter 47 Securities Regulation

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  1. Chapter 47Securities Regulation Twomey, Business Law and the Regulatory Environment (14th Ed.)

  2. Securities Regulation[47-1] I. Blue Sky Laws (State)Protect public from intrastate sale of worthless securities II. Securities Act of 1933 (Federal)A. Deals with original issue of securities in interstate commerceB. Administered by the SECC. Requires filing of registration statement with SEC before most offerings or sales of securities to publicD. Requires seller of securities to provide prospectus to potential purchasers of securities III. Securities Exchange Act of 1934 (Federal)A. Deals with secondary distribution of securities traded in interstate commerceB. Administered by the SECC. Requires registration with SEC of exchanges, brokers, and dealersD. Requires reports of financial and nonfinancial information about registrantsE. Makes trading on “insider information” unlawful Chapter 47

  3. 1933 Act Exemptions [47-2] Chapter 47

  4. Registration Periods Chapter 47

  5. Chapter 47 Summary State blue sky laws, which apply only to intrastate transactions, protect the public from the sale of fraudulent securities. The term security is defined sufficiently broadly to encompass not only stocks and bonds but also any conceivable kind of corporate interest that has investment characteristics. There are two principal laws providing the basic framework for federal regulation of the sale of securities in interstate commerce. Chapter 47

  6. Chapter 47 Summary [2] The Securities Act of 1933 deals with the issue or original distribution of securities by issuing corporations. The Securities Exchange Act of 1934 regulates the secondary distribution or sale of securities on exchanges. The Securities and Exchange Commission administers these acts. Except for certain private and limited offerings, the 1933 act requires that a registration statement be filed with the SEC and that a prospectus be provided to each potential purchaser. Chapter 47

  7. Chapter 47 Summary [3] Criminal and civil penalties exist for fraudulent statements made in this process. The 1934 act provides reporting requirements for companies whose securities are listed on a national exchange and unlisted companies that have assets in excess of $3 million and 500 or more shareholders. Rule 10b-5 is the principal antifraud rule under the 1934 act. Chapter 47

  8. Chapter 47 Summary [4] Trading on “inside information” is unlawful and may subject those involved to a civil penalty of three times the profit made on the improperly disclosed information. The SEC under authority of the Williams Act regulates cash tender offers. The securities industry provides arbitration procedures to resolve disputes between customers and firms. Chapter 47

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